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The analysis of a particular industry in terms of the opportunities and threats presented to a firm by the immediately prevailing environment. This can be used: (i) to appraise the attractiveness of the industry to investors or new entrants; and (ii) to devise competitive strategies appropriate to the industry in question.The standard tool for such an analysis is Porter’s Five Forces, which focuses on competition between existing firms, barriers to entry (i.e. factors that prevent competitors from entering the market), pressure from substitute products or services, the bargaining power of customers, and the bargaining power of suppliers.

(i) to appraise the attractiveness of the industry to investors or new entrants; and (ii) to devise competitive strategies appropriate to the industry in question.